Nonprofit Conversation

The goal of "Nonprofit Conversation" is to provide a forum for discussion of nonprofit success and challenges. Bunnie Riedel (host) provides advice, observations and solutions for the nonprofit community. Guest bloggers will be invited to share their ideas and interviews will be conducted with nonprofit executives, board members and other experts in an effort to create a "conversation."

Monday, March 19, 2012

For about the last six months I haven't been keeping up this blog. I think it was time for a break. During that time, I have received some really great articles from law firms, nonprofit professionals and consultants. It's time to come around again and share the amazing writings of others. But first, an idea that has been rumbling around in my head. The idea of "Servant Leaders." I hope you enjoy! Bunnie

As someone who has been “doing” nonprofit work for over twenty years, I frequently find myself aghast at what goes on in the nonprofit world.Too often, the nonprofit world becomes the dumping ground for people who can’t make it in business or other professions.It is a “fall-back position” as it were.

Or, as bad, for board members, it is a resume builder.

The nonprofit world is either a calling or it is not.And I would challenge those who make it their place maker or their name maker to get out.

Many years ago a woman, who later become my dearest friend, came to me in tears.She had been a lawyer at a large federal government agency and became the executive director of a nonprofit.She was having difficulty adjusting to the nonprofit environment, dealing with the myriad of personalities that were her board.I said to her “Have you ever done church?Because if you’ve done church you will know that the people you are dealing with are emotionally invested in that organization and that is why they act that way.Just like “church people.”It could be church or any other religious or fraternal organization, but it is instructive that people who give their money or their time to nonprofit causes do so for a reason, they are emotionally invested in the work of the nonprofit.

Needless to say, she went on to be very successful in her job, she became a servant leader.

A friend of mine today sits on the board of a theatre company in Colorado.They are pursuing a bold initiative of securing large sums of money to buy a building that will not only house theatre productions but all sorts of community events.This is a very intelligent man with a deep business background who probably doesn’t have the time to give, but gives it anyway because something has sparked his passion for the project.So he spends inordinate amounts of his time meeting and planning and visioning.He is a servant leader.He looks at his community and sees a need and is willing to sacrifice a part of his life in order to accomplish something grand.

Then I see nonprofit executives who seemingly don’t give a hoot for their membership.These “executives” basically float along without commitment all the while collecting a pay check and doing a snow job on the very people who count on them.They prey on the nonprofit world because they know the business world wouldn’t tolerate them for five seconds.Or I see board members who show up for meetings (most of the time) and nod and smile, eat the cookies and drink the coffee and go home without regard or care for the organization.

Recently, I heard of an organization that ran up huge liabilities and after a few years it finally came to the attention of the board.I wanted to ask “Where were they when those first few financial statements came out?”

The nonprofit world requires servant leaders.It requires people who have a love for what they do.It very often requires personal sacrifice and it requires passion every moment of every day.

While I firmly believe nonprofit entities should be run like a business with an eye to the bottom line and good business practices, by and large, nonprofit entities are not making widgets, we are solving problems, meeting needs and securing quality of life for now and the future.

According to a Johns Hopkins report “Global Assembly on Measuring Civil Society and Volunteering," nonprofits and the civil society contribute more than 7% of the United States gross domestic product.

“According to the report, the civil society sector — comprising private, not-for-profit hospitals, schools, social service agencies, symphonies, environmental groups and many other organizations — accounts on average for 5 percent of the GDP in the countries covered, and exceeds 7 percent in some countries, such as Canada and the United States. By comparison, the utilities industry — including gas, water, and electricity — in these same countries accounts on average for only 2.3 percent of GDP, the construction industry for 5.1 percent, and the financial intermediation industry embracing banks, insurance companies, and financial services firms, for 5.6 percent.”http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=656

That report was done in 2007, my guess is with the faltering economy the nonprofit share of the GDP has grown.

One might say that nonprofits are the backbone of our economy, our quality of life and our civil discourse.

Therefore, they need to be treated with respect.

I would ask anyone involved in any way with a nonprofit and within eye-shot of this post to look deep into their souls and ask “why?”Are you there to be a servant leader or are you looking to get something for yourself out of it?If your answer is the latter, please be honest and walk away.

Servant leaders give of themselves.They engage in their cause and find passions they never knew existed.They don’t ask “what’s in it for me?”They ask “what can I do to make it better?”

Very often, servant leaders don’t get paid what they are really worth, but servant leaders reap the rewards in accomplishment.And frankly for me, I wouldn’t have it any other way.

Wednesday, September 14, 2011

This is an area I've been thinking about a lot lately. Organizations and individuals at all levels are vunerable to hacking. There is a major initiative in this country to counter "cyber terrorism" and cyber security is the hottest topic in board rooms and war rooms. What is scarey is that many nonprofit organizations have limited ability and resources to combat security breaches. And as more nonprofits move to online donations, online membership registrations and sales, personal information becomes more accessible to those who would exploit it. Joseph Steinberg points out that nonprofits must be concerned with cybersecurity and should take up this issue as soon as possible. Bunnie

The Hackers Are Coming: What Steps to Take NOW To Ensure Cybersecurity of Your Non-Profit

By Joseph Steinberg, CISSP, ISSAP, ISSMP, CSSLP

Non-profits, like most modern organizations, handle significant amounts of sensitive information – which often residesin electronic form on Internet-connected computers and networks. Donor details, information about programs run and people receiving aid, employee and payroll records, and many other forms of data are all of significant value to criminals.

Hackers know that non-profits often don’t have the resources to invest in expensive security systems, and that computer systems in use may be several years old and designed before non-profits were being targeted with digital attacks. Cyber-thieves understand, therefore, that such systems often contain vulnerabilities and lack cyber-defenses, making them easier to hack than many systems in the commercial sector.

The consequences of compromised security may not be small. Bad press, the breach of confidentiality and embarrassment emanating from the leakage of data about people being helped by the non-profit, fines from credit card companies for failure to confirm to security requirements, or donors suffering the anguish of identity theft and blaming anorganization’s negligencecan be catastrophic.

Some cases have made the media. When the Columbia Triathlon Association website was hacked, for example, cybercriminals successfully pilfered information about over 8,000 members – including a password database in encrypted form.

So what can a non-profit do to ensure that it remains cyber-secure? While a single article is not sufficient to cover all the aspects of cybersecurity in a non-profit setting, here are several high-level pointers…

First and foremost, commit to actively ensuring cybersecurity. The cost – in terms of time, money, and aggravation – will likely be far less if a proactive approach is taken.

Create proper policies governing who has access to which resources, and implement rules and technology to enforce these policies. Access to systems and information should always be on a “need to know” basis. Systems should be used for only their intended purposes and not for others, such as reading email or accessing Facebook. Ensure that every user has her own credentials and that all systems require a login with a password that is not easily guessable or found in the dictionary.

If wireless (or wired) Internet is provided for guests within a facility, implement it on its own separate network – isolated from any non-profit systems and networks.Visitors have no need to access any internal systems.

Don’t let them.

Branch office managers should ensure that they conform to all security policies of the parent organization and should also implement security to ensure that a breach at another branch, or at the main office, does not prorogate to their location.

Store all sensitive data – including donor information, employee data, documents related to programs being run and beneficiaries from any charity, etc. – in encrypted formats. When in doubt, encrypt.

Select and implement security technology to meet functional and security requirements– and ensure that all technology is kept up to date. Keep in mindthat all major recent cybersecurity breaches have occurred to organizations running firewalls, anti-virus software, and other security products, and so…

Perhaps most importantly, leverage the services of a skilled cybersecurity professional to properly design your cybersecurity plan.Remember, cybercriminals have technical expertise. Shouldn’t you have it to defend your organization?

Joseph Steinberg (CISSP, ISSAP, ISSMP, CSSLP) is a respected cybersecurity expert and the C.E.O. of Green Armor Solutions, a leading provider of information security software. An industry veteran with 20 years of experience, Joseph is often sought after by organizations ranging from global corporations to small businesses to assist them with their digital security needs. He is the inventor of several cybersecurity technologies, the author of a book and many articles on cybersecurity-related matters, and a frequent lecturer on topics related to cybersecurity, technology, and business. For more information, or to contact him, please visit www.JosephSteinberg.com

Monday, August 22, 2011

Sherry Truhlar is the Diva of charity auctions.Not only does she know what's she'd doing, she absolutely knows what you should be doing. Knowing your constituents or customers (as I would call them) is vitally important to your fundraising efforts. People have very different motives for supporting your organization. Maybe they are absolutely emotionally involved in your work or perhaps they attend your events to social and have a good time.Knowing this and also knowing how well you performed can only help you build a "product" (your next fundraiser, next programming effort, next auction) that will appeal to your current donors and to future potential donors. Thanks Sherry for the advice! Bunnie

When it comes to incorporating a simple auction idea into your fundraising gala, don’t forget about one of the easiest ways to get feedback from your charity auction: surveying your auction guests. I was reminded of this recently while listening to the radio.

On a recent morning show, the DJ was asking his co-hosts and callers about their preferred superhero power.

“If you could have one superhuman power,” he’d ask, “What would it be?”

Flying and invisibility were popular, but so was the ability to read minds.

The ability to read minds would be handy at a benefit auction. You could finally learn what guests really thought about your creation. Did they notice the theme? Did they understand where the money was going? Did they mind the cash bar? From a planner’s perspective, we want to know what the guests preferred. Knowing our guests preferences helps us plan a better event.

Some guests will comment about the gala when they check-out. Others will complain to an administrator. Some folks will make an effort to find and compliment the Auction Chair before they leave. But all three of these methods are haphazard ways to track data.

Surveys are an excellent yet underutilized charity auction tool.Here are some questions you might ask:

Did you attend the gala as a sponsor, as a guest, or as an individual ticket holder?

What city / suburb is most convenient for you to attend a fundraiser?

How many fundraisers do you attend in a year?

What night of the week are you most likely to attend a fundraiser?

Where did the proceeds of the gala go?

You can also ask guests to rate elements of the night. For instance, on a 5-point scale, you might ask them to rate the registration, check-out, food, dress code, location, facility, benefit auctioneer, auction items, or entertainment.

For high participation in your survey, keep it short. And send your survey promptly, preferably within three to four days of the auction. That way, the gala is still easy for them to remember.

To create your survey, consider SurveyMonkey. It’s a popular service because the format is straightforward and the tool is free, as long as you work within the company’s designated parameters.

If you’ve got an event coming up, I advocate that you design and write your survey now, prior to the auction. Then the survey link will be ready to email the day after the event. Outside of reading your guests’ minds, a survey is your best method for finding out what your guests most enjoyed about your benefit auction.

About the Author

Benefit auctioneer Sherry Truhlar's entertaining stories and advice is often picked up by publications (e.g. Town & Country, The Washington Post Magazine, AUCTIONEER, The Eleusis, The Virginia Auctioneer) and television (e.g. E! Style, TLC) where she inspires and teaches volunteers how to hit new fundraising records in their auction galas. Enjoy her FREE Auction Item Guide(listing the 100 best-selling items to sell in your benefit auction) at http://www.RedAppleAuctions.com .

Monday, August 1, 2011

The IRS is conducting the biggest crack-down on nonprofits in my memory. I believe part of this is an attempt to make up sluggish revenues due to our recession. The implication for nonprofits is great and the burden falls greater on small nonprofits. Think garden club or the local Kiwanis Club. Those with revenues below $25,000 per year are now required to file a 990 (pick the form).

According to Nonprofit Times, "In 2008, nonprofits known as “nonprofit institutions serving households,” a broad subset of the sector, generated 5.2 percent of U.S. GDP, representing $751.2 billion worth of output. Nonprofits’ share of GDP grew 0.4 percentage points from 1998 to 2008."

As a friend pointed out the other day, nonprofits are domestic because most work to benefit their local communities. That means nonprofits typically are not shipping jobs off shore, but instead keeping them local, very local.

I get it...we need revenue, but cracking down on the small nonprofits may not be exactly the most efficient way to get there. Thanks to the folks at Venable for another great article on trends in the nonprofit sector. Bunnie

Audra J. Heagney

Kristalyn J. Loson

IRS Announces First Round of Revocations for Nonprofits that Failed to File Form 990

by Audra J. Heagney and Kristalyn J. Loson

On June 10, 2011, the Internal Revenue Service ("IRS") released the complete list of approximately 275,000 nonprofit organizations that have lost their tax-exempt status for failure to file Form 990, Form 990-N, Form 990-EZ, or Form 990-PF for three consecutive years. The list of revoked entities is available on the IRS website.

The list includes the organization’s name, Employer Identification Number, last known address, and effective date of revocation of exempt status; it will be updated monthly. In its announcement, the IRS indicated that it believes most of these organizations are likely defunct, however, it has issued guidance regarding the steps such organizations must take to apply for reinstatement of their tax-exempt status.

This is the first group of revocations resulting from the passage and implementation of the Federal Pension Protection Act (the "Act"), passed by Congress in 2006. The Act mandated annual filing requirements for virtually all tax-exempt organizations, including tax-exempt organizations with gross receipts of $25,000 or less that were not previously required to file an annual return with the IRS. The Act also provided for the automatic revocation of any tax-exempt organization that does not file the required returns or notices for three consecutive years, and requires the IRS to publish and maintain a list of all such organizations that are so revoked.

In conjunction with its recent publication of the names of the first wave of organizations with revoked tax-exempt status, the IRS also issued guidance regarding the impact that the revocations have on charitable contributions to revoked organizations, and the manner in which organizations may seek reinstatement of tax-exempt status, including retroactive reinstatement. The IRS also announced transition relief for certain small tax-exempt organizations.

In connection with the announcement and publication of revocations of exempt status, the IRS issued the following guidance:

Revenue Procedure 2011-33 (Contributions to Revoked Organizations) states that where an organization listed in Publication 78 ceases to qualify as an organization to which contributions are deductible under Section 170 of the Internal Revenue Code (the “Code”), as a result of loss of exempt status due to failure to file annual reports for three consecutive years, grants and contributions made to the organization by persons unaware of the change in the status of the organization generally will be considered allowable if made on or before the date of publication of the list of revoked organizations. The IRS may disallow a deduction for any contribution made after revocation of exempt status but prior to the published notice of the revocation where the grantor had knowledge of the revocation prior to publication, was aware that revocation was imminent, or was, in part, responsible for the revocation. Publication on the list of organizations whose tax-exempt status has been revoked is intended to serve as a notice to donors and others that they may no longer rely on a prior listing in Publication 78.

Revenue Procedure 2011-36 (Reduced Fee for Reinstatement) reduces to $100 the user fee charged for the reinstatement of exempt status of small exempt organizations that normally have annual gross receipts of not more than $50,000 whose exemption was automatically revoked pursuant to Code Section 6033(j).

Notice 2011-43 (Transitional Relief) provides transitional relief for small organizations that had their exempt status revoked because they failed to file a required annual electronic notice for the last three consecutive years. An organization with annual gross receipts of less than $50,000 that qualifies for transitional relief pursuant to the criteria set forth in this Notice, and applies for reinstatement of exempt status by December 31, 2012, will be treated as having established reasonable cause for failure to file annual returns and exempt status will be reinstated retroactive to the date it was revoked.

Notice 2011-44 (Process for Reinstatement) sets forth the steps that an organization must take to apply for reinstatement of exempt status and request retroactive reinstatement after an organization's tax-exempt status was automatically revoked under Code Section 6033(j). An organization must use the same form filed by other applications for recognition of tax exemption to seek reinstatement, and must pay the applicable user fee. If an organization is seeking retroactive reinstatement, it must submit information demonstrating reasonable cause for failure to file an annual report, among other supporting materials.

The Treasury Department and the IRS intend to issue regulations under Section 6033(j) of the Internal Revenue Code, implementing rules regarding the application for reinstatement of tax-exempt status and the request for retroactive reinstatement. Comments are currently being solicited on the materials and issues addressed in Notice 2011-44. Comments are due August 19, 2011.

Tuesday, July 26, 2011

Doug White,director of the Heyman Center for Philanthropy and Fundraising at the New York University School of Continuing and Professional Studies, provides excellent advice for management of nonprofits.

Sometimes it does amaze me how nonprofits operate without any business sense whatsoever. As a business owner myself, I understand the concept of responsible money management. However, I frequently see nonprofits that spend beyond their means, or offer compensation far beyond the capacity of the organization, or have boards of directors that haven't the first clue as to their roles and responsibilities.

The link in the title above leads you to Mr. White's book. Might be a good idea to pick one up and pass it around your board. Bunnie

Charities Would be Wise to Adopt Professional Management and Oversight Standards

by Doug White

Although the nonprofit world has grown tremendously over the past decade – nonprofit expenses fast outpacing GDP, for example – the management approach at charities has, in large part, stayed informal.In the past, charities were largely comprised of a few people who shared similar heartstrings and, if nothing scandalous happened, the public pretty much thought they were doing good by society.Although that’s true today for many charities, scrutiny by the public and by regulators has increased dramatically, and charities – large and small – would be wise to adopt professional management and oversight standards.

Unfortunately, those standards don’t exist.At best, we’re relegated to wobbly conversations about best practices; the worst among us just don’t care, and think their philanthropy is an extension of their business ventures or their personal egos. Does the name Madonna (Raising Malawi), Greg Mortenson (Central Asia Institute), or Lance Armstrong (Lance Armstrong Foundation) ring a bell?All have run charities where either they or their charities have run into trouble – within the last few months.And there have been others.

Not all charities need the highest, most sophisticated levels of governance; not all charities need federal and state charitable tax experts– attorneys and accountants – to serve as either advisors or board members; not all charities need the most accomplished executive directors.But all charities – as they all have in common that they were formed to serve the public good in a way that neither business can nor government will – must do their best to run themselves in a businesslike manner.At least to a point – and, as important, run themselves as stewards of the public trust.

Admittedly, there is a limit to the idea that a charity is a business.There is no question that charities need to balance their books and operate in a professional atmosphere – indeed, almost all charities are incorporated as businesses – but while business principles provide the basis for the basics, they alone do not serve a charity well in fully pursuing its mission.For that, a nonprofit needs vision and an understanding that the enterprise is not at all private: it is public in the most literal sense of the word.When an organization is granted tax exemption – when its donors are entitled to a tax deduction and its own profits are untaxed – it takes money from the public; it diverts money from the Treasury.For that reason – a reason quite separate from the growing swell of public scrutiny – charity leaders, both staff and trustees, need to be fully aware of financial, governance and ethical pitfalls.

That awareness does not come about by accident or even goodwill.It grows from a sincere commitment to serve society in an intelligent way.And that means tomorrow’s leaders (and as many leaders of today who are open-minded about staying up on things) must take seriously opportunities for learning.Tomorrow, take note, may be here sooner than we think: A recent study by the Meyer Foundation, “Daring to Lead,” reports that fully two-thirds of all nonprofit executive directors are planning to leave their jobs within the next five years.Talk abut turnover.The replacements will need solid training to prepare them to deal with issues that, quite frankly, most of them probably don’t think they should have to anticipate.But today’s daily headlines should be a forewarning to them, as well as a warning to executive directors and board members who are on the job today.

Like anything else, running a nonprofit is a skill no one is born with.Just as future professionals enroll in universities that offer business, law, and medical programs – as well as many other types of graduate learning – today’s nonprofit leaders would be wise to understand that their organizations will have the best opportunity to thrive if they are run by people who know what they are doing – by design, not by chance.

Doug White is the academic director of the Heyman Center for Philanthropy and Fundraising at the New York University School of Continuing and Professional Studies. His most recently published book is "The Nonprofit Challenge" (Palgrave Macmillan).